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Invoice Factoring

invoice factoring

Invoice factoring is a growing form of business financing. Having been around for over a hundred years, invoice factoring was once looked at as a last resort, today it is a great way for businesses to create working capital. Many traditional lending institutions have stiff financing processes that can take a long time to receive approval but when using an invoice factoring company you can have fast approval and cash in hand within days not weeks. This is also a great option for businesses with less than perfect credit histories, this can make financing through a traditional lender nearly impossible. With invoice factoring the businesses credit history is not a deciding factor with approval, the customer invoices are. Invoice factoring companies will offer businesses 70% to 85% of their invoice totals in cash advances. Invoice factoring is a fast, easy and cost effective way for business owners to get the money they need.

Common uses for Invoice factoring

  • Meet payroll obligations
  • Free up money to start new project
  • Renovations
  • Remodels
  • Invoice purchases
  • Equipment Purchases
  • Tax payments

What is invoice factoring?

Invoice factoring is the sales of customer invoices by a business to a factoring company in exchange for cash. Businesses can receive 70-85% of their customer invoice totals, creating working capital for the business. There are two main forms of invoice factoring available; non-recourse and recourse factoring. Each as its own benefits to the business owner.

Non-recourse factoring is where the factoring company holds all risk in the invoice factoring process. The factoring company is responsible for collecting the customers debt on the invoice. If the customer fails to pay the factoring company can not go to the business owner who sold the invoice for repayment of the money. The factoring company must pursue all legal actions to receive the money from the customer, not affecting the business in any way. In layman’s terms the business owner is not responsible for any unpaid debt.

Recourse factoring the business owner is responsible for collecting the customers invoice debt. If the customer does not repay the debt the business is responsible for repaying the factoring company for the cash advanced on the invoice. The business owner is also responsible for any legal actions needed for customers repayment.

Common benefits to Invoice Factoring

  • Not a loan
  • Credit History does not matter
  • Does not affect businesses credit rating leaving lines of credit open for use
  • Fast approval
  • Cash in hand within days
  • 70 to 85% of invoice total
  • Low fees

Terms and Conditions of Invoice Factoring

Every factoring company has their own terms and conditions that they follow. On average there are three fees associated with invoice factoring; Discount Charge, Management Fees and Credit Protection Charge. The Discount charge is typically 1.5% to 3% of the invoice total and is calculated daily and applied monthly. Management fees are determined by the turnover, ranging from 0.75% to 2.5%. The Credit Protection Charge applies to those using non-recourse factoring,this fee ranges from 0.5% to 2% of the invoice. Many factoring companies have hidden fees so it is important to go through all areas of the contract before signing.
Factoring companies often require 3 months notice for cancellation of their services otherwise the business will be hit with unwanted fees.

How to get Invoice factoring services

  1. Find a factoring company that offers these services
  2. Make sure your business meet the factoring companies requirements
  3. Submit your business and invoice information
  4. Negotiate the terms and conditions of the contract, if possible
  5. Sign the contract and submit your business bank account information for direct deposit.

Tips when looking into Invoice Factoring

  • Look into a few different invoice factoring companies to ensure that you are getting the best possible rates and services
  • Always negotiate the terms and conditions of the contract
  • Be aware of any rates and fees that apply
  • Make sure to pay attention to the cancellation terms to ensure your business does not pay unnecessary fees
  • Like with all types of financing only use invoice factoring if you absolutely need to, it is not free your business is paying out money to use these services
When You Are Ready, We Are Here

Factoring.net is ready when you are. If you’re running low on working capital or just need some extra funds, Factoring is a great way to leverage your already existing assets – your receivables. Fill out the short application now or give us a call.

  • Factoring is not a Loan, it's a sale of YOUR receivables!
  • Our rates are the lowest in the industry, starting at 1.5 %.
  • We offer a non-recourse factgoring. Sleep soundly at night!
  • We fund approved deals within 48 hours.
First time factoring?Learn about Factoring

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Don't take our word for it

Everyone was very helpful to our company throughout the process. We really needed to get cash for invoices immediately, and Kris along with the rest of his team delivered.

- Kristin Wintum Charles Town, WV testimonial
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